8 Ways Venmo Makes You Money With Every Transaction

Did you know that Venmo comes from the latin word salesmanwhat does “sell” mean – or that it was once a music startup where you could send text messages to bands to receive MP3s via email?

However, these details, however interesting, are not what we will be discussing today. Instead, we’ll look at other aspects of Venmo that can save you significant amounts of money if you continue to use the app.

While Venmo may seem like a free service, it can be quite expensive if you don’t understand how it works as a business. So how exactly does Venmo make money from its customers? Let’s find out.

What is Venmo?

Venmo, founded in 2009 by Andrew Cortina and Ikram Magdon-Ismail, is the leading mobile payment app in the US. It allows people aged 18 and over to send money to each other for free. You can instantly transfer funds to friends, family or businesses with the click of a button without any transaction fees directly from your android or an Apple smartphone.

Venmo also has built-in social features. For example, users can add friends who use the app and see (depending on their privacy settings) details about their transactions, such as timestamps and descriptions. You can also exchange emoji on Venmo when making or requesting payments, making the payment process easier.

Combined with a comfortable personality, Venmo’s social component made it an instant hit, especially among the youth. After a series of acquisitions in 2012 and 2013, Venmo was taken over by PayPal. It has over 70 million users and processes about $230 billion worth of payments annually.

How does Venmo work?

Anyone who wants to send or receive money using Venmo starts by downloading the Venmo app. After registration, you can link your new account to a debit card, credit cardor check your account and immediately start adding friends and exchanging money.

Want to keep money in your Venmo account as a wallet? You can do it too! But this is not necessary – many exchange funds directly from their debit card, credit cardor bank account.

Users can also request a Venmo debit card. By connecting to the app, people can purchase products and services, as expected, from the growing number of companies accepting Venmo payments.

Venmo users can also use the app to cash checks after verifying their identity, buy products using QR codes in the store, and receive wages by direct transfer to their Venmo account. In addition, you can buy, sell and store bitcoin, ethereum, litecoin and bitcoin cash. Unfortunately, it is currently not possible to make purchases with cryptocurrencies in your Venmo account.

How does Venmo make money?

Now that we know a bit about Venmo, let’s take a look at eight ways Venmo makes money. Keep These Sources of Income in Mind When You Use It app for earning. Then, whether you’re an individual or a business owner, you can use this knowledge to reduce Venmo’s unnecessary costs.

1. Purchase by credit card

As we’ve seen, you can send money, receive money, and make standard payments for free with Venmo. However, this changes when you use a credit card rather than a debit card or checking account. In these scenarios, you pay a transaction processing fee of 3%.

This means that sending $100 to a friend using a credit card connected to your Venmo account will cost $3. It may not seem like much, but it adds up over time.

2. Transactions with payment through Venmo

Venmo offers people a fast and easy way to pay for goods and services. But did you know that the seller (i.e. the company you buy from) has to pay a processing fee for each purchase?

While it’s free for the user, Venmo charges the seller 1.9% of the purchase price plus a flat fee of $0.10 per transaction. So, for example, if they spend $100 on Home Depot products, they only get $98 of it. The other $2 goes to Venmo.

3. Instant transfers

Let’s say someone sends money to your Venmo account that you want to transfer to your bank account. With the Instant Transfer option, you can do just that and have access to these funds within 30 minutes.

It’s lightning fast compared to the usual 3-5 business days! You pay for the privilege. Standard withdrawal doesn’t cost a cent, but Venmo takes 1.75% of everything you send via instant transfer. So you will pay a minimum of $0.25 per transfer, but no more than $25.

4. Credit card interest and fees

Credit cards are one option when you need quick access to money you don’t already have. The trouble comes when you cannot repay the money and sin on their obviously expensive interest rates and penalties for late payment.

The same is true for Venmo, which offers Visa and Visa Signature credit cards to qualifying customers. Depending on your account, the Annual Percentage Rate (APR) for these cards can be as high as 25.99%. This also applies to cash advances, transaction fees and any penalties you incur in the process. In other words, despite the many perks, you run the risk of paying through your nose if you mishandle your Venmo credit card.

5. Withdrawal fee

Their debit card is another way for the company to generate income. While you can get the card for free and use it in stores without paying anything, some cash withdrawals come with a fee.

For example, if the ATM you are withdrawing from is not part of the MoneyPass network, you will pay $2.50 (on top of what the ATM owner wants to charge). There is no charge if it is “on-net”. Venmo users also pay $3 to withdraw cash without a prescription from a bank or other financial institution.

6. Cashback program

One of the main incentives for using Venmo debit or credit cards is the cashback you can earn by using it at select stores/merchants and on qualifying purchases.

All winners. Users get cashback, merchants increase sales, and Venmo generates additional income. So what about Venmo? Earn? Teaming up with Dosh (an automated cashback platform) that pays her a referral commission.

7. Cryptocurrency fees

Venmo also makes money when people buy and sell cryptocurrencies on the platform. This comes in the form of a transaction fee that increases with the size of the sale. Here’s how much users are currently paying to sell/buy:

• Anything between $1 and $4.99 costs $0.49.
• Anything between $5 and $24.99 costs $0.99.
• Anything from $25 to $74.99 is $1.99.
• Anything from $75 to $200 is $2.49.
• Anything between $200.01 and $1,000 is subject to a 1.80% fee.
• Anything over $1,000 is subject to a 1.50% fee.

Notice, however, that we didn’t say “keep.” Storing cryptocurrency on Venmo is free. You only pay when you buy and sell it.

8. Cash a check

Venmo allows users to cash checks if they have a Venmo debit card, verify their email address, and turn on the direct deposit feature. But once you do, cashing a check this way will give you quick access to the money.

Unfortunately, this convenience comes at a price. Venmo charges a hefty 5% on all accepted checks, except for paychecks and government checks, for which it charges 1%. What’s more, they won’t cash checks for less than $5. The maximum amount you can cash out per day is $5,000 and the maximum amount per month is $15,000.

But is Venmo safe?

Generally speaking, yes, Venmo is safe to use. It boasts a huge user base of over 70 million people. It’s safe to assume that these numbers would be significantly lower if there were a fundamental security issue!

In particular, Venmo protects users from unauthorized transactions by using advanced data encryption technology that protects your account information. It also stores user data on servers in secure locations and allows people to log out of phones they may have lost or stolen. Combine these precautions with a PIN you can set and Venmo will be safe. However, there are some factors to consider.

What are the risks of using Venmo?

Risks arise in the territory of applications connected to the Internet, especially those related to financial transactions. So, whether we are discussing Venmo, PayPal, Revolut, or other similar applications, users must take into account all the risks.

The main one comes from hackers. In theory, someone with bad intentions and the right skill set could bypass Venmo’s security measures.

If someone gained access to the app, they could transfer funds to a different bank account and change the associated email address. This way the user will never get transaction notifications to let them know that something is wrong.

Luckily, a few simple strategies can help you avoid this nightmare scenario. Start by limiting the amount of money you keep on Venmo and only use it with trusted friends and family. A secure PIN/Touch ID will help, as well as setting your account to “private”.

If this is not enough to limit the amount of cash in your Venmo account, please note that Venmo is not insured by the Federal Deposit Insurance Corporation (FDIC), unlike traditional US banks. This means that there is a risk that you will not get your money back if the company goes bankrupt or otherwise loses your money.

Reducing Venmo Costs

Ultimately, the best way to cut your Venmo costs is to reduce the number of Venmo-paying products you use.

Avoiding their credit card, cashing checks the old-fashioned way, ignoring the instant transfer feature, and only withdrawing cash from ATMs on the MoneyPass network, you don’t have to spend a dime.

This is more difficult if you are in business or have side job which accepts Venmo payments. However, the associated fees are unavoidable, so the only option would be to switch to cash-only transactions or cheaper electronic alternatives.

Final Thoughts

While Venmo is used by tens of millions of Americans today, we’re willing to bet that only a few can answer the question, “How does Venmo make money?” Well, now you’re one of the few who know.

In addition, we hope that by considering the ideas in this article, you will also be able to use the application at a minimal cost while saving more of your own money.

This article originally appeared on Geek Wealth.